Category: Deductions & Credits Copyright 1998, The Tax Resource Group. All rights reserved. Telephone 800-578-3498. Internet: www.taxresourcegroup.com Taxpayer suffers from Alzheimer's disease and is completely unable to care for herself as a result. $7,500 per month is expended for her convalescent care. Are the amounts expended for convalescent case deductible as medical expense for tax years before 1997? Obviously, to the extent any of the $7,500 per month is attributable to what would traditionally be considered medical care, that amount is per se deductible. Reg. Section 1.231-1(e)(1)(v)(b). The question in this case is what about the amounts that would in another context be considered ordinary, personal, living expenses? There is a body of case law to the effect that the cost of maintaining a dependent parent in an old-age home for reasons other than medical considerations is deductible only to the extent of the cost of actual medical treatment. Smith Est. v. Comr., 79 T.C. 313, 321-22 (1984); Robinson v. Comr., 51 T.C. 520, 540-41 (1968), aff'd per curiam, 422 F.2d 873 (9th Cir. 1970); Ball v. Comr., 37 T.C.M. 1573, 1574 (1978); Matles v. Comr., 23 T.C.M. 1489, 1497 (1964). However, Regulation Section 1.231-1(e)(1)(v)(a) provides as follows. Where an individual is in an institution because his condition is such that the availability of medical care (as defined in subdivisions (i) and (ii) of this subparagraph) in such institution is a principal reason for his presence there, and meals and lodging are furnished as a necessary incident to such care, the entire cost of medical care and meals and lodging at the institution, which are furnished while the individual requires continual medical care, shall constitute an expense for medical care. For example, medical care includes the entire cost of institutional care for a person who is mentally ill and unsafe when left alone. ...the cost of care and supervision, or of treatment and training, of a mentally retarded or physically handicapped individual at an institution is within the meaning of the term "medical care." [Emphasis Added.] Based on the regulation set forth above, it seems the existence of a mental condition which renders the person unsafe to be left alone transforms expenses which would otherwise be viewed as personal living expenses into deductible medical expenses. Based on this regulation alone, it appears to me that the level of care necessitated by Alzheimer's disease should qualify as a medical expense. Surprisingly, I can find nothing in the pre-1997 tax literature specifically about Alzheimer's, but there are a number of other cases and rulings supporting medical deductions for the cost of maintaining patients with various other kinds of mental illnesses. Revenue Ruling 75-303, 1975-2 CB 87. Revenue Ruling 71-347, 1971-2 CB 114. Bye v. Commissioner, 31 TCM 238 (1972) Following are some private letter rulings. Although such rulings cannot
be cited as precedent per IRC Section 6110(j)(3), the rulings may provide
incite into how the IRS might view similar situations.Letter Ruling 8636020
(Mental retarded child.) Letter Ruling 8518061 ********** It seems to me there is a wealth of technical support for the proposition that a medical deduction is allowable for maintenance expenses of a person incapable of caring for himself (to such an extent that the safety of the person (or others) is in jeopardy unless adequate supervision is provided) which expenses are necessitated by some physical or mental problem. It does not seem to be necessary to make a distinction between mental and physical illness. It seems to me that if one can deduct the cost of institutional care necessitated by mental retardation, conditions which are commonly understood to be mental illness, autism, drug addiction, and stroke, then Alzheimer's should be treated no differently. Despite the existence of this technical support, the taxpayer still bears the burden of proving that the treatment in this case is necessitated by the condition rather than some other factor such as family considerations. I would strongly advise taking the appropriate steps now to establish the fact pattern necessary to support the deduction you intend to claim on the taxpayer's behalf. I would suggest obtaining a letter from the taxpayer's physician to the effect that constant custodial care is necessary as a result of Alzheimer's disease and without such care, the taxpayer's condition would endanger herself and possibly others. As I understand it, your question deals with tax years 1995 and 1996. Note that for tax years after 1996, the law specifically allows a medical deduction for long term care services. See IRC Sections 213(d)(1)(C) and 7702B(c). A taxpayer qualifies if they are unable for a period of more than 90 days to perform two or more function of daily living which include eating, toileting, transferring, bathing, dressing, and continence. In addition, the Conference Report on the Health Insurance Portability and Accountability Act of 1996, H. Rept. 104-736, H.R. 3103, provides that it is intended that an individual who is physically able but has a cognitive impairment such as Alzheimer's disease or another form of irreversible loss of mental capacity be treated similarly to an individual who is unable to perform (without substantial assistance) at least 2 activities of daily living. |
